# Prepare Financial Documents

### **What Do Lenders Look for When Reviewing a Mortgage Application?**

Lenders assess mortgage applicants based on their ability to **repay the loan**. They evaluate several key factors, commonly known as the **"Five Cs of Credit"**:

1. **Credit Score & History -** Lenders review your **credit report** for payment history, outstanding debts, and any derogatory marks (late payments, bankruptcies, foreclosures).
2. **Income & Financial Stability -** Lenders are looking for what money you have coming in to be able to make the monthly mortgage payment with.
3. **Debt-to-Income (DTI) Ratio -** Your **DTI ratio** (total monthly debts ÷ gross monthly income) shows how much of your income is already committed. Most lenders prefer a **DTI of 36% or lower**, though some loans allow up to **43%-50%**.
4. **Cash Reserves & Assets -** Shows lenders you have a financial cushion(includes things such as savings, investments, retirement accounts) 
5. **Condition of Property & Value -** The home itself is collateral for the loan, so lenders assess its **appraised value, location, and condition**.

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### Essential Documents for Mortgage Qualification

To streamline the application process, have these documents ready:

**1. Proof of Income**

* [ ] Last **2 years of W-2s**
* [ ] Recent **pay stubs (last 30-60 days)**
* [ ] Employer contact for verification
* [ ] Last **2 years of tax returns** (Personal & Business)
* [ ] Year-to-date **profit & loss statement**
* [ ] 1099 forms
* [ ] Any other Income: Rental income (lease agreements) Alimony/child support, Social Security, pension, disability income

**2. Credit & Debt Documentation**

* [ ] Make sure your credit accounts are **unfrozen** for a credit report to be ran.
* [ ] Itemized list of **monthly debt obligations** (credit cards, auto loans, student loans, personal loans)

**3. Proof of Assets & Down Payment**

* [ ] **Bank statements** (last 2-3 months) to verify funds
* [ ] Statements for **stocks, bonds, retirement accounts**
* [ ] **Gift letter** (if receiving down payment help from family)

**4. Identification & Legal Documents**

* [ ] Government-issued **photo ID** (driver’s license, passport)
* [ ] **Social Security number** (for credit check)

**5. Property-Related Documents (After You've Found a Home)**

* [ ] Signed **purchase agreement**
* [ ] Homeowners insurance quote
* [ ] Appraisal & home inspection reports (lender will arrange)

***

### **Applying with a Co-Borrow or Co-Signer**

If your financial profile alone isn't strong enough to qualify for a mortgage, you can apply with a **co-borrower** or **co-signer** to improve your chances ( read about [Co-Borrower & Co-Signer](/appendix/real-estate-concepts/co-borrower-and-co-signer.md)). The Co-Borrower route is generally the route to go when considering to start a Tadaima home with a close friend. The Co-SIgner route is if you're looking to qualify still on your own, but need help qualify from someone who trusts you (usually a family member). **Either way**, these individuals will also need to be involved in the process and will be asked to prepare the above documents too.


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